GIS - General Mills gains after strong pricing leads to beat-and-raise quarter

2023-03-23 07:31:38 ET

General Mills ( NYSE: GIS ) traded higher early on Thursday after sliding past consensus marks with its FQ3 earnings report and lifting its guidance range.

Total sales were up 13% for GIS during the quarter to $5.1B including a two-point headwind from net divestiture and acquisition activity and one point of unfavorable foreign currency exchange. The North America Foodservice segment saw the biggest boost from pricing and mix during the quarter. Organic net sales increased 16% during the quarter, driven by positive organic net price realization and mix, with organic pound volume essentially matching year-ago levels.

Gross margin was up 160 basis points to 32.5% of sales, driven by favorable net price realization and mix, partially offset by higher input costs and unfavorable mark-to-market effects. Adjusted gross margin was up 240 basis points to 33.8% of sales, driven by favorable net price realization and mix and Holistic Margin Management cost savings, partially offset by input cost inflation and higher other cost of goods sold. Operating profit fell 10% year-over-year to $730M, reflecting higher selling, general, and administrative expenses and a lower net gain on divestitures, partially offset by higher gross profit dollars.

General Mills ( GIS ) disclosed that cash provided by operating activities totaled $2.0B through nine months of FY23 compared to $2.2B a year ago, driven primarily by an increase in inventory and higher cash tax payments. Capital investments of $351M essentially matched year-ago levels.

Looking ahead, the food giant expects organic sales to be up 10% to 11% in FY23. Adjusted operating profit is now expected to increase 7% to 8% in constant currency vs. previous range of up 6% to 7%. Adjusted diluted EPS is now expected to increase 8% to 9% vs. a prior range of up 7% to 8%.

Shares of General Mills ( GIS ) rose 1.41% in premarket trading to $81.00 vs. the 52-week trading range of $64.42 to $88.34.

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